Cathie Wood’s investing style is starting to show signs of life. Some of the exchange-traded funds that she helps run as the co-founder, CEO, and investment manager of Ark Invest are finally sporting positive year-to-date gains. For now, she’s still trailing the market overall in 2024.
But Wood continues to build out her existing positions. She bought shares in Shopify(NYSE: SHOP), Meta Platforms(NASDAQ: META), and Coinbase (NASDAQ: COIN) on Monday. Let’s take a closer look at her latest purchases.
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Shares of Shopify have soared 62% since bottoming out this summer, but the company has just now shifted to brandishing positive year-to-date returns. It’s been a long way back for the popular e-commerce platform that gives budding entrepreneurs and established brands an easy way to set up a digital storefront. And it’s not a surprise that Shopify’s revival is mirroring the turnaround for Ark Invest. Shopify is Wood’s largest combined holding across all funds.
Shopify doesn’t report fresh financials until it announces its third-quarter results next week. But momentum has been strong since it served up well-received second-quarter numbers in early August.
Image source: Getty Images.
Revenue rose 21% for Shopify in the second quarter. That’s the weakest year-over-year top-line growth for the provider of white-label e-commerce services in two years. However, Shopify was only modeling for its business to grow at a high-teens percentage rate for the quarter back in May. The company also no longer has the logistics business it recently unloaded. Revenue would have climbed 24% to 25% on an apples-to-apples basis.
The bottom line was even better. Shopify returned to profitability, and free cash flow more than tripled. Shopify has trounced analyst profit targets with ease over the past year, but that hasn’t always been enough. The stock tumbled in May, after Shopify offered weak guidance that it was able to overcome three months later. That wasn’t a problem this time around.
Shopify didn’t just exceed Wall Street pros’ forecasts on both ends of the income statement. Shopify sees growth accelerating in the quarter that it will deliver on Nov. 12. Expectations are high, given the stock’s heady run since its last financial update, but Wood thinks it can live up to the hype. There’s a reason she’s adding to her position now instead of waiting a week to see how reality plays out for the top e-commerce company.
Wood is following a different playbook for Meta. The parent company of Facebook, Instagram, and WhatsApp reported its third-quarter results last week. It was a solid beat, but the stock declined on Halloween, as there were tricks tossed in alongside the treats.
Meta also offered up problematic guidance, warning about rising spending costs. Let’s get back to the treats, though. Meta’s reach is massive, with 3.29 billion daily active users across its platforms. That’s a modest 5% increase over the past year, but its monetization abilities keep getting better. Revenue climbed a better-than-modeled 19%, and earnings per share rose nearly twice as fast with its 37% jump.
There is an opportunity in the market’s near-term concerns. Revenue growth decelerated after five straight quarters of sequential acceleration, but it’s growing at a brisk pace that justified its multiple of 22 times forward earnings.
This has been a good year for crypto investors. Bitcoin(CRYPTO: BTC) is up more than 60% this year, but the big gains aren’t reflected on the largest trading platform for cryptocurrencies, as Coinbase stock is up only 7% in 2024. Bitcoin accounts for 37% of the trading volume on Coinbase, but some crypto denominations have fared even better.
Investors can’t complain. Coinbase has still popped more than fivefold since the beginning of last year. Coinbase reported quarterly financials on the same day as Meta, and it posted even stronger growth. Revenue nearly doubled, but it struggled on the bottom line. Coinbase did reverse the small net loss form a year earlier, but its adjusted net income has fallen short in back-to-back reports.
Wood is a big believer in crypto in general and Bitcoin in particular, and Coinbase continues to be one of her favorite ways to cash in on the digital-currencies wave.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Meta Platforms, and Shopify. The Motley Fool has a disclosure policy.
